Silver initially took off to the upside at the start of the week, only to plunge lower, testing the $25 region. That being said, the market has been very noisy since then, so it’s difficult to get a gauge on where we are going next. The RSI had been in the oversold condition, so the fact that we plunged probably wasn’t a huge surprise considering that we were also at resistance, but the market does look like it is trying to turn around in the middle the day and I think this brings to light a very important point: Volatility is going to be a major issue in this market, so you need to be very cautious with your position sizing. While I do not advocate shorting this market, you can make a huge argument that we are overbought.
At this point, we are also going to start seeing the bond markets try to dictate where we go next. It currently looks as if the Fed Bonds Futures markets are trying to price in rate cuts by March, which of course means loose monetary policy might be on the horizon. If that’s the case, that typically works for precious metals. However, it is crucial to understand that the market had gotten a bit stretched, so some profit-taking would make sense regardless of what the bond markets tell us.
As we head into the month of December, liquidity starts to become a bit of an issue as well, so that’s also something that is most certainly worth paying attention to. At this point, silver is probably a market that’s better left alone, but if we were to break above the highs of the day on Monday, then obviously we would have much further to go to the upside. From a longer-term standpoint, I think you have to look at this as a buying opportunity on dips, but as I watched the charts I see the markets jumping all over the place in New York trading, showing you just how volatile this market is probably going to end up being.
Being FXEmpire’s analyst since the early days of the website, Chris has over 20 years of experience across various markets and assets – currencies, indices, and commodities. He is a proprietary trader as well trading institutional accounts.